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Issues:
Whether the excess amount paid due to fluctuation in the rate of exchange is allowable as revenue expenditure in computing the income of the applicant for the assessment year 1975-76. Analysis: The case involved the question of whether an excess amount paid due to fluctuations in the exchange rate should be considered as revenue or capital expenditure for the assessment year 1975-76. The assessee had purchased machinery from a foreign company on a deferred payment scheme, leading to an increased payment in terms of rupees due to exchange rate fluctuations. The Income-tax Officer disallowed the excess payment as capital expenditure, which was upheld by the Commissioner of Income-tax (Appeals) and the Tribunal. The Tribunal considered the fluctuation in exchange rates as part of the "rate of exchange recognized" by the Government, following previous judgments. The Court referred to a similar case involving additional expenses for repayment of a foreign loan due to exchange rate variation, which was considered capital expenditure. The Court held that the excess payment due to exchange rate fluctuations should be treated as capital expenditure, in line with the previous decisions and the nature of the original machinery purchase cost being capital expenditure. The Court cited previous judgments and held that the enhanced payment due to exchange rate fluctuations should be classified as capital expenditure, similar to cases involving foreign loan repayments. The Court emphasized that the original machinery purchase cost was capital expenditure, and any additional payment due to exchange rate fluctuations should also be considered capital in nature. The decision was based on the principle that any accretion to the original capital expenditure should also be treated as capital expenditure. Therefore, the Court ruled in favor of the Revenue and against the assessee, affirming that the excess payment due to exchange rate fluctuations was not allowable as revenue expenditure for the assessment year 1975-76. The judgment highlighted the distinction between revenue and capital expenditure in the context of exchange rate fluctuations affecting payments for foreign purchases. It underscored the principle that any additional payment arising from such fluctuations should be treated as capital expenditure, aligning with previous decisions and the nature of the original transaction. The Court's decision was based on established legal precedents and the specific circumstances of the case, ultimately upholding the treatment of the excess payment as capital expenditure rather than revenue expenditure.
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